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SA economy could worsen

South Africa’s economic prospects have become dimmer and could worsen due to widespread labour unrest, an economist said on Tuesday.

Old Mutual Investment Group SA economist Rian le Roux said in a speech prepared for delivery in Johannesburg that recent disruptions in the market and a weakening rand could result in a lower gross domestic product growth, higher inflation, and wider current account deficits for the country.

He said the wider deficit would lead investors to see rising macroeconomic risks in the country.

“Foreign investors have good reason to be concerned about the macroeconomic risks – of 16 emerging markets… South Africa measures dead last in terms of its combined current account and budget deficits,” he said.

The labour unrest had also highlighted South Africa’s lack of competitiveness to the world.

“While our overall ranking in the World Economic Forum at 52 out of 144 countries in its 2012/2013 Global Competitiveness Index is not too bad, we rank awfully lowly in some key areas.”

These included the quality of primary and higher education, the flexibility of wage setting, hiring and firing practices, and pay and productivity.

“South Africa was ranked absolute last for labour-employer cooperation,” he said.

Le Roux said he was not optimistic that conditions to stimulate growth would improve significantly over the near term.

“Although the weaker rand will help boost exports, rising cost structures may quickly erode the benefit,” he said.

“At the same time, any hope of major direct foreign investment has likely been seriously dented by recent events and concerns over future political, economic, and policy stability.”

He said the government should see the recent downturn as a sign to focus more on its economic policies.

“Hopefully, the recent labour unrest, downgrades by rating agencies and the rand’s slump will dramatically elevate SA’s economic challenges up the government’s policy agenda.”

 

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